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The Costs of Babylon—Linguistic Distance in Applied Economics

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  • Ingo Eduard Isphording
  • Sebastian Otten

Abstract

Linguistic distance, i.e. the dissimilarity between languages, is an important factor influencing international economic transactions such as migration or international trade flows by imposing hurdles for second language acquisition and increasing transaction costs. To measure these costs, we suggest to use a new measure of linguistic distance. The Levenshtein distance is an easily computed and transparent approach of including linguistic distance into econometric applications. We show its merits in two different applications. First, the effect of linguistic distance in the language acquisition of immigrants is analyzed using data from the 2000 U.S. Census, the German Socio-Economic Panel, and the National Immigrant Survey of Spain. Across countries, linguistic distance is negatively correlated with reported language skills of immigrants. Second, applying a gravity model to data on international trade flows covering 178 countries and 52 years, it is shown that linguistic distance has a strong negative influence on bilateral trade volumes.
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Suggested Citation

  • Ingo Eduard Isphording & Sebastian Otten, 2013. "The Costs of Babylon—Linguistic Distance in Applied Economics," Review of International Economics, Wiley Blackwell, vol. 21(2), pages 354-369, May.
  • Handle: RePEc:bla:reviec:v:21:y:2013:i:2:p:354-369 DOI: 10.1111/roie.2013.21.issue-2
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    References listed on IDEAS

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    1. Cristina Fernández & Carolina Ortega, 2008. "Labor market assimilation of immigrants in Spain: employment at the expense of bad job-matches?," Spanish Economic Review, Springer;Spanish Economic Association, pages 83-107.
    2. Alicia Adsera & Mariola Pytlikova, 2012. "The role of language in shaping international migration," Norface Discussion Paper Series 2012014, Norface Research Programme on Migration, Department of Economics, University College London.
    3. Isphording, Ingo E. & Otten, Sebastian, 2014. "Linguistic barriers in the destination language acquisition of immigrants," Journal of Economic Behavior & Organization, Elsevier, vol. 105(C), pages 30-50.
    4. David Reher & Miguel Requena, 2009. "The National Immigrant Survey of Spain. A new data source for migration studies in Europe," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 20(12), pages 253-278, March.
    5. Petroni, Filippo & Serva, Maurizio, 2010. "Measures of lexical distance between languages," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(11), pages 2280-2283.
    6. repec:zbw:rwirep:0274 is not listed on IDEAS
    7. Ku, Hyejin & Zussman, Asaf, 2010. "Lingua franca: The role of English in international trade," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 250-260, August.
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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